The First Rule Is Do No Harm

I like Barack Obama. He seems like a good man who is sincere, with a wonderful family. He has a great sense of humor. His interviews have shown him to be politically adept at handling the media. Taking responsibility for his horrendous cabinet appointee snafus was the right thing to do. But I think he is being overwhelmed by the job, and he better find a Karl Rove equivalent if he wants to succeed. As a side note, Joe Biden is a buffoon.

Obama’s first two weeks in office have been staggering at the magnitude of the issues this relative political novice is facing. The blow up in Gaza right before his inauguration, Russia making moves to squelch his proposed troop increase in Afghanistan by cutting off the main American base is Kirgizstan, North Korea testing missiles again, and Iran launching a satellite into space, all of these portend bad things coming.

Here at home, the proposed stimulus package is rapidly losing political support as the staggering amount of pork is exposed to public scrutiny. Does San Diego really need a space for a dog run? Less that 10% of the bill is for infra structure projects. America’s matriarch, Nancy Pelosi, has put Obama in the untenable situation of having to look to Republicans for cover. Any effect on the economy, if at all, will only be felt two to four years down the road…and we will feel it with high interest rates and rampant inflation.

None of his economic advisors are doing what actually needs to be done to solve the economic crisis. This isn’t an inventory recession; it is a credit freeze recession. If they don’t stabilize the banks by either changing the mark to market bond rule, or insure the “toxic” bonds, or buy the bonds as originally promised back in September when the Troubled Asset Recovery Program (TARP) was first passed, there WILL be a catastrophe.

Quietly and very slowly, notwithstanding the inflammatory headlines, things are beginning to turn around. Credit is beginning to flow again. Here is a fast money lesson. Banks loan each other money, and take security to insure the loans. The interest rate paid from one bank to another is called the LIBOR rate, and many adjustable rate mortgages are tied to it, including mine. Back in September, with the collapse of Lehman Brothers, the 3 month LIBOR rate reached 4.5%. It usually is around 1%. This indicated a credit freeze. Banks stopped lending to each other because the security offered was worthless under current rules. Over the past 3 months, LIBOR has been slowly falling. For about a day a few weeks ago, it actually went under 1%. Right now it is at about 1.25%. This means that money is beginning to flow again.

Any move by the government to stabilize the questionable bonds will break the ice jam. The problem is, the government, under Bush and now under Obama, won’t do it. Two days ago Senator Charles Schumer from New York said it was too difficult to do because the bonds can’t be valued. Here is a value…50 cents on the dollar, and our government will make money on the deal. All of the money contained in the stimulus package won’t mean a tinker’s damn unless the government moves to stabilize the asset issue. Obama has promised a plan sometime next week, most likely based on bond guarantees. Hopefully, it will be based on pure economics and not political ideology.

What is scary is that Treasury Secretary Tim “ the tax cheat” Geithner was heavily involved with the Lehman collapse, the AIG bailout, and the subsequent mismanagement of the TARP funds spent afterwards. More than a few people in the know have stated his lack of abilities and experience made a difficult situation disastrous, triggering the huge difficulties we find ourselves in now. Now, now he is heading the whole show. He is not up to the task. Sure makes me feel secure.

The first rule of government in these kinds of situations is to do no harm. What do you think?